In the liberal spirit of waiting for real facts, I'll withhold judgement until you outline the cons of the plan, but be forewarned (grin), I'll expect to see some strong arguments on how the basic voucher plan won't be wittled down (under the mandate of cost control) until it no longer covers decent care (especially for major illnesses, like cancer, transplants, and heart disease, mental illness, etc.). Then if standard coverage doesn't apply a solution, folks would be individually charged whatever the market will bear (and cherry picked, as well) for so-called supplementary policies that have no controls and for which they probably can't afford to pay unless family income is above true middle class ($50-75K/yr).

I'm reminded of Delta Dental Insurance: insurance that gets your teeth cleaned and maybe a tooth filled once a year, but all the major things you need are not covered.

If you do away with Medicare I assume that the remaining Medicare trust fund would then be diverted to this new program.

Does a 10% VAT actually cover the costs for reasonable coverage for all? What is in the VAT? What is the analysis on a 10% VAT on sales? What does it do to the programs already supported by a sales tax should revenue drop due to diminished sales?

What controls are built into the system to stop payment avoidance? Are insurers just going to pay, or else? Do providers still need to retain staff to haggle with the insurance companies?

What happens to the VA?

Will this system guarantee that my particular situation will be covered as part of the basic package? If it doesn't this system has done me jack.

In health care, cost control is everything.

Amen!

There's nothing progressive about wasting 20% to 50% of the dollars spent on health care.

I would say at least 50% is wasted.

But... I am sure that with universal pre-k even more than 50% will be wasted.

Back when I was managing restarants I did a samll poll of working single mothers and found that they valued free pre-k at below $10.00/week. In other words if ask woudl they rather have $10/week or free pre-k they took the $10/week.

BTW at risk of being a broken record:

IMO One big key to getting control of costs is for the insurer (state or company or other) to get the insured to help. Creative ideas to do this are needed.

If you do away with Medicare I assume that the remaining Medicare trust fund would then be diverted to this new program.

The plan as described by Ezra does not eliminate Medicare -- it simply stops new enrollees. It would take decades to wind down the system.

Does a 10% VAT actually cover the costs for reasonable coverage for all?

I'm no economist, but I'm given to understand a well-run 10% VAT would likely bring in revenue equal to something like five to seven points of GDP. Given the continued existence of Medicare, and the fact that lots of healthcare (cosmetic surgery, co-pays, over the counter drugs, French-style supplemental health insurance policies, whatever else the government decides not to pay for, etc.) will continue to be paid for by private actors, the 10% VAT funding mechanism actually sounds fairly feasible.

In France, Canada, and the UK supplementary funding is either illegal, restricted, or discouraged.
In Canada if your health problem is not cost effective you cannot buy it privately. You have to go to the States and pay the whole cost privately. In the UK there is a private system but you cannot add onto the public system (in most cases). In France the amount of supplementary care is limited to around 3% of your income.

Under this plan Americans are still at liberty to buy cost-ineffective drugs and treatments. An old lady with multiple brain tumors and a big wallet can still get that MRI even if basic care doesn't cover it. Even if there is a .1% chance of success some Americans will still pay outrageous sums for the possibility of an extended. This is backed up by comparing the healthcare spending of Americans in their last 3 months and comparing this to any other system.

So why exactly is spending likely to decline under this plan? If your old and rich (albeit less rich under this plan) are you not just as likely to spend as much as possible to extend your life?

And if your reason is preventive care, at least explain (Ezra has yet to ever do this). No medical journal I have read has ever found any significant benefits and most find the outcomes either ambiguous or dependent on the type of preventive care.

1. Delta dental insurance is a poor example. The yearly maximums of today's dental "insurances" are somewhere in the neighborhood of $1400-1500. In the 1960's they were $1000-1100. It simply hasn't kept pace with inflation or the cost of doing dentistry. It's not insurance any more, it's a finite dollar amount that you have to spend each year on your oral health.

2. What about the training of doctors? A tremendous amount of funding for medical schools comes from CMS/Medicare to say nothing of the fact that every medical resident is paid through CMS/Medicare. Where is this money going to come from?

My key question--what does a voucher-approved plan cover, and how is that decided? Is it like the Oregon plan (which I highly approve)--here's the most cost-effective use of X dollars?

In France, Canada, and the UK supplementary funding is either illegal, restricted, or discouraged.
In Canada if your health problem is not cost effective you cannot buy it privately. You have to go to the States and pay the whole cost privately. In the UK there is a private system but you cannot add onto the public system (in most cases). In France the amount of supplementary care is limited to around 3% of your income.

Under this plan Americans are still at liberty to buy cost-ineffective drugs and treatments.

All public health systems do this. Taiwan pays for sham BS like "natural" chinese medicines which are nothing but snake oil. The UK NHS pays for homeopathy, which is another total sham.

In short, no country in the world has been able to get its public to accept a refusal of sham treatments.

"In a voucher system, they can't deny coverage to anyone, they can't price folks out...they just take whoever comes. Additionally, the government pays them on a risk-adjusted basis (i.e, you get a lot more money for a diabetes patient than a healthy 23-year-old), so it doesn't even make much sense to discriminate based on conditions."

I dunno, I actually think this is the biggest stumbling block. Basically, the risk-adjusted reimbursement has to be actuarially spot on, or else I think you'd run into the same problems with adverse selection vs cherry picking that we have now. And from the point of view of the insurance companies, I'm not sure how an individual who is currently too unhealthy to cover becomes a good risk just because the government is paying the bill instead of the individual. I realize the take-all-comers provision is intended to circumvent these issues, but I'm sure the insurance companies will figure out some sort of shenanigans.

Overall, of course, this plan is a massive improvement over the current system. No doubt.

I have some questions:

1) Does the government, under this plan, determine a basic level of service that is required for a plan to receive vouchers?

2) If the answer to #1 is yes, on what basis will insurers compete if they don't compete on cost or coverage?

3) What about concepts like deductables, life-time maximums, and so on? Will these continue to exist?

4) Suppose I chose Insurer A because they have good customer service and are good at paying for things like doctors visits but are lousy somehow for if you're really sick. If I get cancer will I be able to switch to Insurer B who is known for being good at taking care of people who are seriously ill? This seems like it would be a lousy deal for Insurer B and a great one for Insurer A. Wouldn't that create a perverse incentive to be good to your insureds when they're well and nasty to them when they're sick?

5) Following along with question 4, wouldn't there be a strong incentive on insurers to get they're customers to switch plans when they get sick?

Basically, the risk-adjusted reimbursement has to be actuarially spot on, or else I think you'd run into the same problems with adverse selection vs cherry picking that we have now.

Exactly. Does anybody seriously think the government will find a way to consistently (and to the satisfaction of insurance company shareholders) make it sufficiently financially attractive to insure, say, a diabetic or an MS sufferer or just a run-of-the-mill old person? I'm deeply skeptical. I can just imagine the disparities in new customer acquisition budgets -- you know, lots of ad dollars spent in Beverly Hills, not so many in Compton.

You might see a voucher scheme work with a very robust government reinsurance program, but (I predict) not without.

How does this change the incentive for insurance companies to not actually pay for care?

Given that the premium is fixed, it seems like the biggest source of profit for insurers would be to pay less for care--i.e., to pay for cheaper (less effective) care, to look for excuses not to pay, and to make it as difficult as possible for health care providers to get reimbursed for the care they provide.

Ezra,

As I've argued before, integration is crucial for cost control.

Except that it isn't, I've made this point previously. Besides price negotiations, there isn't an advantage to "integration" that couldn't be similarly achieved via effective regulation. In fact, you really could do the same on prices as well. Of course, what you lose with integration is the ability to be more flexible outside of any core principles that would be similarly fixed under a regulatory system. This is an extremely important point.

Essentially, you get almost all the benefits of single payer.

Lol. No bias in your analysis at all, Ezra?

If they start competing to attract business, however, there's a real chance their competition could create some genuine advances. If it doesn't, it would be trivial to add a public competitor. And if costs didn't go down, the system's financing structur would generate enormous pressure to add a public competitor, or pursue some other initiative that would cut spending.

So here's the other important point, I think you're missing the key design feature of voucher-based system. Costs of the system only go down, if voucher values go down. Costs only go up if voucher values go up. This point is clear. What is less clear is the implications-- insurance companies would have a much greater incentive to control costs. Currently, insurance companies have decided that its easier to collect a premium of X, and if their expenses are 110% of X, then they'll pass on those additional costs in next year's premium. With a voucher system, that dynamic no longer exists in the same way. An insurance company is going to be faced with figuring out how to controls costs within the voucher value of X, because if its 110% of X, then they lose money for that year. They can lobby government for an increase in voucher value for next year, but they won't get it to a level that would allow them to recoup their losses from the first year. So what does that mean? Insurance companies will be laser-focused on figuring out what utilization controls they need to implement to ensure their costs are below X. Its the only way they can stay in business. (As Ezra rightly points out, the other games played today would not be possible under this system.)

The other key component Ezra didn't mention is that the Regional Health Boards provide an evaluatory function for citizens. In other words, they would collect data on quality of health plans which would be shared with people to help make their plan selection. So for the several questions above that rightfully ask about insurance companies trying to shift their sick patients off their rolls by providing terrible service-- that data would be collected (e.g. satisfaction numbers) and provided via the Regional Health Board. In other words, providing bad care is also a losing proposition, because neither the healthy nor sick people are going to choose a plan with low satisfaction scores.

So gaming the system no longer exists, and insurance companies only make money by effectively keeping costs under the value of the vouchers themselves. Its a great plan in concept.

How does this voucher plan differ in any significant way from Congress's attempt to control cost by enrolling everyone in Federally regulated HMOs? It seems most individuals would in fact be forced into HMOs. This seems like the logical next step to their stated plan from 1973. Ted Kennedy said everyone should be in an HMO funded and regulated by the Federal Government. Does the fact that the public overwhelming rejected HMOs not count for anything?

What if all the carriers in one metro area decide to only offer HMOs and I don't want an HMO? United Healthcare in the past 2 years has bought 3 of the largest carriers in NV and now controls 70% of the business. The majority of what they don't control are self funded employer and union plans. So once this law passes United Health will have 90%+ of the Nevada Market. Just about every citizen in the state will be forced to purchase care from a single Insurer who is paid by the Federal government. When the Federal government needs to cut spending they just lower what they pay United Health who cuts our benefits. What choice do we have? it would appear none.

I'm getting ahead of things though, I'm sure you will discuss this all in great detail Ezra, ye of infinite Healthcare knowledge.

"Essentially, you get almost all the benefits of single payer."

Except of course you don't get what is probably one of the most important benefits of single payer.

One of the big ideas behind single payer is that you would reap massive cost savings by reducing the administrative costs. I've seen estimates that 20-30% of health care costs are administrative. All those billing specialists that medical providers have to have in order to figure out how to get paid. All the people at the insurance companies getting paid to review claims. One of the nice things about a true single payer system was that you could reap cost savings with out actually having to cut care.

Of course this voucher system doesn't have that property. This voucher system seems to leave us with a lot of the same problems of our fractured health care system.

Jason K,

"All the people at the insurance companies getting paid to review claims."

And who do you think pays claims in a single payor model the claim pixie who gladly works for magic dust?

The nice myth about single payor is it saves money. Sadly when the light of reality shines down all examples of single payor in the US are less efficient then the insurers and TPAs on the private side. It's all documented, with information so readily available why are you looking at estimates? They are estimating becuase they can't supply any real data to back up the claim

The nice myth about single payor is it saves money.

Yeah, and even when it does save money it's only in mythical lands like Narnia and France.

All of this only works with

a) a well-informed consumer who actually picks coverage in a sensible way and

b) insurance companies that decide to offer plans with enough differentiation to make a) meaningful.

And that's after we assume that risk-adjusted reimbursement blah blah blah actually works and isn't just cost-plus.

I would love, for example, to join a plan that offers family coverage with less than a seven-grand family deductible. Haven't found it in my state, don't expect to.

Ezra--
Great post. (I've also written about Emanuel's plan which I find very attractive for many of the same reasons. But you've put it very well.

I'm looking forward to part II.

IN this thread people have raised some questions which Emanuel answers in the book:

'Does the government, under this plan, determine a basic level of service that is required for a plan to receive vouchers?

Yes it does--it's a very high-level comprehensive package--better than Medicare and better than 80% of employer-based plans.

2) If the answer to #1 is yes, on what basis will insurers compete if they don't compete on cost or coverage?

Insurers will have to compete on Quality--i.e. the quality of the doctors in their network, the quality of the hospitals (this means providing incentives for hospitals to reduce infections, etc.).

They can also compete on customer service: how long does it take to get an appt? If you call with a question does the customer service person have an answer?.

3) What about concepts like deductables, life-time maximums, and so on? Will these continue to exist?

There is no deductible and co-pays are minimal. There is no life-time maximum.

How, then, do they control costs? Under Emanuel's plan, an independent "Comparative Effectivess Institute" will compare new drugs, devices to what is already on the marekt to see if they are indeed more effective than the lower-priced products and procedures that they are replacing.

The FDA does not do this now because lobbyists for these companies won't let them. But since Emanuel's plan is funded by a VAT tax, this health plan won't have to keep going back to Congress for new appropriations--so it will be insulated from the lobbyists. (Revenue from the VAT will rise with inflation.) 2) If the answer to #1 is yes, on what basis will insurers compete if they don't compete on cost or coverage?

3) What about concepts like deductables, life-time maximums, and so on? Will these continue to exist?

4) Suppose I chose Insurer A because they have good customer service and are good at paying for things like doctors visits but are lousy somehow for if you're really sick. If I get cancer will I be able to switch to another insurer I get cancer will I be able to switch to Insurer B who is known for being good at taking care of people who are seriously ill? This seems like it would be a lousy deal for Insurer B and a great one for Insurer A. Wouldn't that create a perverse incentive to be good to your insureds when they're well and nasty to them when they're sick?

See answer below to question 5.
5) Following along with question 4, wouldn't there be a strong incentive on insurers to get they're customers to switch plans when they get sick?

No--Because if an insurer winds up with more sick patients than the average insurer, the government gives that insurer extra money to cover the extra risk.

So insurers will no longer have an incentive to avoid sick patients. And they will have an incentive to become known for being very good at treating cancer because that will bring more customers--both cancer patients and people who worry about getting cancer.

Yes.

Insurers cannot drive down costs. All they can do is lower reimbursement rates. This means that providers will seek out customers that need the services for which the reimbursement is above costs and to quit providing procedures for which the reimbursement is set too low. Since hospitals and providers can do and not do procedures, the government basically determines what procedures will be available in the U.S. and those that do not.

There is no provisions for funding medical research. There is no provisions for funding training. All providers would be looking to lower wages which will create more shortages of practitioners. Many good ideas will idea because reimbursement will be set too low and thus, no one will offer the procedure or purchase the device or prescribe the drug.

There is no allowance for eye care, dental, prescriptions. Will the government really start paying (through the voucher) for lasik, glasses, dentures, and breast implants?

The idea that current healthcare costs can be lowered from 16% GDP to 8% GDP is laughable. Anyone interested in a career in healthcare would have to be insane to enter the field in such an environment.

DMonteith,

Your welcome to take your single payor to either of those places.

Maggie Mahar,

Curious, why do you call these facilitators insruance companies? From your discription I don't see them assuming any risk nor providing any insurance.

The biggest problem today is utilization. People have low out of pocket so they consume a lot of it. Heck if you pay the premium mines well use it. Does it not seem a little counter productive to lower their out of pocket cost even further? Are you trying to collapse the entire economy?

By what logic, or lack there of, is it cheaper for me to pay VAT to the government to pay vouchers to an Insurance company to reimburse my doctor? Couldn't I just paythe doctor myself and save 2-3 steps and 20%?

Was this proposed as a serious plan or is it really someone being a joker and publishing the dumbest ideas they could come up with and selling it as a real plan?